Bloomberg- Dura Automotive Systems Inc.’s plan to exit bankruptcy may reward company managers with as much as $60 million in stock while leaving most bondholders empty- handed.
Pacificor LLC, a hedge fund that owns at least $133 million of Dura’s senior debt, agreed to take control of the Rochester Hills, Michigan-based auto-parts maker, which filed for Chapter 11 protection from creditors Oct. 30. Pacificor teamed up with Dura Chief Executive Officer Lawrence Denton and managers in a restructuring that values the company’s equity at about $600 million; 10 percent would be set aside for executive incentives.
The arrangement provides nothing for holders of Dura’s $561 million of 9 percent subordinated notes due in 2009. Those investors, including a cluster of neighbors who live in the Minneapolis suburbs, are finding that buying distressed debt can be a losing gamble when competing with institutions. The lesson may be reinforced in coming months, because Moody’s Investors Service predicts default rates will triple from the lowest in more than a decade.
